The place for us to start when we talk about primary fuel sources, for generation is fossil fuels. Fossil fuels are made from long dead plant and animal remains that lived millions of years ago. You leave anything around that long and it decays. But add heat and a lot of pressure, and then just wait millions of years, and you have the recipe to make crude oil, coal or natural gas. Those are our fossil fuels. I think it's important to start here because most of our electricity generation has been and is still produced by some type of fossil fuel. It used to be mostly coal but now coal a natural gas are pretty much neck and neck. When I say coal, what comes to mind? Probably, if we're playing award association game, you'd be thinking of maybe emissions or carbon footprint or pollutants. No doubt, coal has been villainized recently. So why is it that up until recently, most of our electricity has come from coal? I think it's important to talk about how and why we got here. You know that customers value reliability and affordability, right? And coal was and is plentiful and affordable. It's also a highly reliable fuel source because it's easy to get and easy to transport. Think back to our last lesson when I talked about based and peak load. If we're applying those concepts here, it probably won't surprise you that coal makes a really good based load. Once coal plants are built and ramped up, they generally stay on to make continuous and affordable power. Incidentally, China, the US, India, and Indonesia are still pretty reliant on coal. Something else you need to keep in mind is that it's not just about opening our electric bill every month. Affordable electricity is also used in manufacturing. So if you think about all the food and other stuff we buy and the pressure in competition to keep prices down, you can see, like coal was a darling for so long. It's really about what customers wanted. A fast shift away from coal would mean a lot of based load to cover, and that means constructing more based load options. Can you see why people are concerned about the impact, on the price we pay for stuff if we don't get the timing right? Looking back in the 70s and 80s, the power plants brought online were mostly coal fired and these based load plants are built to last. Right now, there are under 600 coal plants in the US but they're capable of producing a lot of electricity. The median birth year of a US coal plant is 1972 and nine out of ten plants were actually built in the 1980s or before. The average retirement age of a coal plant is 58 years old. So it tells you a few things, that is a lot of the fleet is nearing retirement age and replacing them is a not a major reaction. It takes a lot planning to ensure we continue to get reliable and affordable energy. That being said, coal's environmental impact while improving with newer plans and the insulation of emission reduction technologies, still does negatively impact the environment. We can expect to see a shift away from coal. The big question is what is the right timing to protect affordability and reliability? I visited with Amy Miller, an environmental expert at PNM and she offered some great perspectives about the role of coal. >> I think what the challenge is, is we all want to move toward cleaner resources. I haven't met anyone on any side of an energy issue that doesn't agree we should be moving toward cleaner more sustainable forms of energy. The argument usually occurs about how quickly we do it and at what cost. >> There's no doubt that coal has definitely been in the crosshairs and while there's a lot of agreement that supporting a clean environment is critical, the timing is often at issue because the consequences could have a negative impact on all of us. Now, let's look at the other fossil fuel that's used for generation, natural gas. It has also been getting a lot of attention lately but in a much different way. Natural gas plants have been used for electricity generation for a really long time. They're good for both handling based load and peak load. In fact, a lot of peaker plants which come online only occasionally to handle that high usage are natural gas plants. More recently they're being held up as a possible solution to balancing affordability, reliability, and environmental stewardship with the shift away from coal. I mentioned earlier that coal and natural gas are pretty much neck and neck. Well, the latest projections from the US Energy Information Administration actually reports that 2016 is the year that gas overtakes coal generation in the US. Natural gas burns pretty cleanly and this isn't news. So then why is it that recently, it's been getting a lot more attention? Easy, it's because the costs have gone way down, and this hasn't always been the case. But here's the deal. The cost has gone down because gas that used to be hard or even impossible to get because it was located in shale, meaning, it was trapped in tiny pore spaces of rock. But things have changed, drillers know that pumping the water down the well under pressure could fracture the shale and free the gas. This has been done since 1940s. Another process rolled out in the '90s but has become more advanced and has revolutionized accessing trapped fuel. It works by drilling down to where the shale is and then turning the well 90 degrees to through the shale. These techniques have unlocked enough natural gas to handle the US's needs for decades. The pros are pretty obvious. Energy independence, inexpensive fuel, low emissions, and US companies economic success. If you've looked at this map, you can see that new gas-fired electricity plants are being located right by those shale areas. So what's the catch? The fact that I used the word fracture and said 90 degrees probably clued you in to why natural gas is not without controversy either. The processes I described are fracking and horizontal drilling. And opponents are concerned about contamination from the fluid and earthquakes that can result from the processes. Now, we're not going to get too deep into this because it's beyond the scope of this course. But I want you to understand something that the general population likely doesn't. That there is a link between the low natural gas prices, electricity production and why things are the way they are. >> We're all, I think, as an industry reaping the benefits of record load natural gas prices. And you don't hear a lot of folks in the electric industry complaining about a sort of the nitro gas prices being in the cellar right now. We'd like to see that continue as long as possible. But that does have an immediate dollar for dollar impact on your bill. Those fuel costs, whether you're a municipal utility, whether you're real electric cooperative or whether you're an investor in utility fuel costs are passed on dollar for dollar to the customer. There's no margin on them. It's just indisputable, the impact this sort of fracking boom has had across the United States on the just the availability of natural gas nationwide. You have abundant supplies in the northeast, you have abundant supplies in the Dakotas. You have abundant supplies here in Colorado, in Texas, Oklahoma. Used to be, we were and this wasn't that long ago. We're talking six, seven years ago looking at shipping gas from the west to east. Now, it's flowing the other direction. It just cannot be over stated enough, I think. The impact it's had on the electric generation industry as you see just as an investment decision. Utilities nationwide going to natural gas as their fuel of choice because it is so abundant and it is so affordable compared it to other resources. >> That wraps our discussion of fossil fuel sources as they relate to electricity production. But I promise you, the conversation will go on. What I'm hoping you've gotten from this is that, just talking about a single primary fuel source has good or bad, doesn't tell the whole story. You need to look at the whole picture. When you see the shades of granite, you know you're getting a more realistic view.
